Section 1.
Enforcement of Trusteeship. Additional means of enabling the Revenue Cabinet to
collect withholding taxes has been provided in KRS 141.310(12) which authorizes
the cabinet to fix the amount of and demand the posting of a corporate surety
bond or cash not to exceed $50,000 by any employer required under KRS Chapter
141, or the administrative regulations promulgated thereunder, to withhold
Kentucky income taxes from wages of employees.

Section 2.
Bond Requirements. For purposes of KRS 141.310(12) a person from whom the
department is authorized to require a withholding tax security bond and those
persons from whom a security bond may be required includes but is not limited
to the following:

(1) An
employer who is delinquent in either filing withholding tax returns required by
law or is delinquent in submitting to the cabinet any tax withheld from an
employee, or both, or

(2) An
employer, whom for any reason, the cabinet determines is or may become an
insecure risk for which there is a need to insure compliance with the law,
including every out-of-state employer during the employer's first year of
operation in this state or any employer engaged under one (1) or more contracts
the total of which is to be performed within one (1) year.

Section 3.
Bond Procedures. The cabinet, after determining that a bond is necessary to
insure compliance of reporting and paying withholding taxes, shall demand the
posting of such a security bond by written notice transmitted by certified mail
and shall include therein instructions and forms for the convenience of the
employer.

Section 4.
Enforcement of Bond Requirement. (1) Failure to post the bond in the amount the
cabinet demanded from the employer within twenty (20) days from the date of the
written notification by certified mail will, by such failure, authorize the
cabinet to invoke forthwith, and without further delay, its statutory authority
to seek a court order requiring cessation of all business or activities of such
an employer failing to post the bonds; provided, that the employer may
accompany the bond with, and simultaneously file with the cabinet, a written
protest or appeal from the cabinet's demand for the bond; provided further,
that any such protest or appeal shall be supported by a written memorandum
advancing the employer's reasons and proposed justifications why such employer
should be relieved from posting the bond or the objections to the amount of the
bond.

(2) Within
sixty (60) days after receipt of any bond posted under protest or appeal, the
cabinet shall furnish the employer by certified mail a final ruling or order
and notice of any change as to, or in the amount of the bond that may be
necessary to be made by the cabinet in accordance with such final ruling or
order in response to the protest or appeal.

Section 5.
Change in Amount of Bond. The cabinet has authority at any time to increase or
decrease the amount of any bond that has been posted.

Section 6.
Monthly Returns and Payment. Notwithstanding the provisions of 103 KAR 18:040
any out-of-state or delinquent employer may be required to file monthly
withholding tax returns and to accompany such monthly returns with a complete
payment of all taxes withheld during the month covered by the return.

Section 7.
Court Jurisdiction. The cabinet may initiate action seeking a court order,
requiring cessation of all business operation or activity of any employer
failing to comply with this administrative regulation, in the Franklin Circuit
Court or in any other circuit court which may have jurisdiction over the area
in which the employer resides, or in which some or all of the employer's
business is conducted, or having jurisdiction of the area in which property of
the employer is located. The cabinet may institute any such legal action in
accordance with any provision of this administrative regulation. (IW-12; 1
Ky.R. 331; eff. 2-5-75; Am. 20 Ky.R. 2879; 21 Ky.R. 16; eff. 6-17-94.)